Abstract

The purpose of this thesis is to examine whether US tariffs on Chinese electric vehicle (EV) battery components redirected US foreign direct investment (FDI) toward major cobalt-producing countries, in particular the Democratic Republic of the Congo’s (DRC) mining sector. The analysis focuses on the escalation period between the United States and China in 2018, with the implementation of Section 301 tariffs.

Using a country-year panel from 2010 to 2022, the analysis implements a difference-in-differences (DID) methodology with fixed effects for both the country and year. The baseline specification results suggest a decrease in U.S. FDI flows in countries with high cobalt exposure after 2018. Nonetheless, after conducting an event study, the results reveal significant pre-treatment effects. The inclusion of country-specific linear trends reverses the effect to an increase, which indicates a positive but sensitive relationship.

The findings suggest that the estimated effects are not robust to other alternative specifications; therefore, the results should be interpreted with caution as they do not support strict causal inference. Overall, the findings are consistent with broader investment reallocation dynamics during increased trade tensions and strategic emphasis on critical minerals.